U.S. Court Blocks Plan to Ease Rule on Media Owners

By STEPHEN LABATON

Published: September 4, 2003

WASHINGTON, Sept. 3 — A federal appeals court issued a surprise order today blocking the Federal Communications Commission from imposing new rules that would make it easier for the nation's largest media conglomerates to add new markets and areas of business.

The decision came a day before the new rules, considered among the most significant efforts at deregulation adopted during the Bush administration, were scheduled to take effect. It followed two hours of oral arguments at an emergency hearing this morning by a three-judge panel in Philadelphia and was a sharp setback for the largest media companies and for the commission's chairman, Michael K. Powell.

Mr. Powell, the architect of the new rules, has emphasized that the commission was compelled to rewrite the old regulations because of a string of federal court decisions in cases brought in Washington by the media companies. Those decisions ordered the agency to reconsider some of the rules.

But today the appeals court voted unamimously to prevent media companies from moving forward with plans to take advantage of the new rules. The court also raised tough questions for the commission and its industry supporters about their efforts to reshape the regulatory landscape. The new regulations are already facing a challenge in Congress, where legislators have taken steps to repeal some of them.

The new rules have been opposed by a broad coalition of groups, ranging from Consumers Union and the National Organization for Women to the National Rifle Association and the United States Conference of Catholic Bishops. Both the House and the Senate have begun the process to repeal at least one of the new rules, the one that makes it possible for the largest television networks to buy enough stations to reach 45 percent of the nation's viewers, up from 35 percent.

The court's order, however, blocks all of the new rules from taking effect, at least until the outcome of the litigation, which could be many months away. The order also raises questions about whether the rules will ever be allowed to take effect.

The rules that were blocked by the court include one that would permit the same company to own newspapers and broadcast stations in the same city and another that would allow a company to own as many as three television stations and eight radio stations in the same market.

In the meantime, the commission must use the older more restrictive rules, even though a different federal appeals court, in Washington, ordered the commission to reconsider those earlier rules after a challenge from the television networks.

Officials at the commission said they were surprised by the order.

"While we are disappointed by the decision by the court to stay the new rules, we will continue to vigorously defend them and look forward to a decision by the court on the merits," said David Fiske, the agency's top spokesman.

The order also came as a surprise to the critics of the new rules, including the plaintiffs in the case, who said before this morning's hearing that their motion to stay the rules was a long shot. They said courts typically do not issue such injunctions without a finding that the plaintiffs are likely to prevail on the overall merits of a case.

The chief lawyer for the critics who brought the case said after the order that he hoped Congress would act before the court reached a decision on the merits of the rules.

"This action gives us the opportunity to convince Congress and, if necessary, the courts, that the F.C.C.'s decision is bad for democracy, and bad for broadcast localism," said the lawyer, Andrew Jay Schwartzman, who persuaded the court to issue the order. "Perhaps it will embolden Congress to overturn the new rules in their entirety. That would save everyone a lot of time and effort fighting it out in the court to obtain the same result."

The court today hedged on the overall merits of the case but strongly suggested through its actions that the critics had a good chance of succeeding.

"I think this is great news," said Senator Byron Dorgan, Democrat of North Dakota, who is helping to lead an effort to repeal the rules in Congress. "It stops the process dead in its tracks for now. I think the court must have understood what we know: the F.C.C. embarked on these dramatic rule changes without the benefit of national hearings and thoughtful analysis."

In a three-page order, the United States Court of Appeals for the Third Circuit initially said that it was legally obliged to consider the likelihood of success by the plaintiffs, a group of small radio stations, journalist organizations and the National Council of Churches. The group filed its lawsuit against the F.C.C. and four television networks joined the case in support of the new rules.

The judges refused to handicap the outcome of the case, but reasoned that preserving the old rules, at least for the time being, would give the judges time to consider the arguments before the industry landscape had been changed. "While it is difficult to predict the likelihood of success on the merits at this stage of the proceedings, these harms could outweigh the effect of a stay on respondent and relevant third parties," said the panel, which consisted of Chief Judge Anthony J. Scirica, who was appointed by President Ronald Reagan, and Judges Thomas L. Ambro and Julio M. Fuentes, who were appointed by President Bill Clinton.

"Given the magnitude of this matter and the public's interest in reaching the proper resolution, a stay is warranted pending thorough and efficient judicial review," the court concluded in the case, Prometheus Radio Project v. Federal Communications Commission.

The groups that brought the case argued that they were likely to prevail in the end because Congress would probably overturn some of the new rules, and because the rules themselves are "arbitrary and capricious."

For Mr. Powell, the decision could hardly come at a worse time. On Thursday, the Senate Appropriations Committee is expected to approve legislation that Congressional officials said today would include provisions to roll back some of the new rules already stayed by the court. The Senate Commerce Committee has adopted a similar measure.

And six weeks ago the House, by a vote of 400 to 21, approved a spending measure that would block one of the more important new rules that would permit the nation's largest television networks to own more stations. The White House has threatened to veto that measure, prompting the prospect of a highly unusual showdown between the president and the Republican-controlled Congress.

The new rules were adopted in June by a bitterly divided commission on a party-line vote. The Republican-controlled agency relaxed many of the most significant restrictions on the ability of broadcast and newspaper conglomerates to both expand into new markets and to extend their reach in the cities where they already have a presence.

The rules would have made it easier for the nation's largest television networks to buy enough stations to reach up to 45 percent of the nation's viewers. Two networks, Fox, a unit of the News Corporation , and CBS, a unit of Viacom , are already above the old 35 percent limit.